Despite widely publicised concerns for China’s
economic growth in 2016, GDP in the country increased 6.7%
year-on-year (y-o-y) between Q1 and Q3, the China State Council
Information Office said during a press conference in
Shaoshi Xu, director of the National Development and Reform
Commission, compared the growth to the previous year, when GDP
in 2015 grew between 6.8% and 7% per quarter.
The State Council expects figures to indicate similar growth
for the fourth quarter of 2016, with full GDP exceeding Chinese
renminbi (Rmb) 70 trillion ($10.2 trillion*), an increase of
Rmb 5 trillion ($0.7 trillion) on the previous year.
A recent report from the International Monetary Fund
(IMF)outlined that China contributed 1.2% to global economic
growth, while the US and EU pushed growth up by 0.3% and 0.2%
Supplier side reform
Xu discussed supplier side reform at the press conference,
which had started in 2016, describing China’s
strategy as "three part deletion, one reduction and one remedy"
as the country looked to cut capacity, inventory and leverage,
in addition to cutting costs and remedying defects.
Capacity cut targets for steel were 45m tonnes affecting
180,000 employees, while capacity cuts for the coal sector in
China targeted 250m tonnes, affecting 620,000 employees. Both
targets were completed ahead of schedule and helped to push the
price of both steel and coal upwards.
Capacity cuts were also carried out in industrial mineral
production such as soda ash, titanium dioxide (TiO2), graphite
and rare earths.
In terms of cost reduction, large companies saw a drop of
Rmb 0.14 in production costs per Rmb 100 turnover, with profit
increases of 0.26 percentage points. Total cost reduction for
all above scale companies in 2016 reached around Rmb 1 trillion
Prices in both soda ash and TiO2 in China saw increases as a
result of capacity reductions throughout 2015, while other
minerals like graphite and magnesia did not see price
improvements owing to a lack of capacity cuts.
The China State Council noted however that recent price
increases were generally the result of short-term factors
rather than fundamental changes in supply and demand.
The council outlined the cyclical nature of commodities like
steel, coal and other industrial minerals, driven more by a
slowdown in economic growth and lower prices, followed by
capacity cuts and a subsequent strengthening of prices.
According to Xu, targets for capacity reductions will be
higher in 2017 and will be more stringently enforced.
A detailed target for steel and coal was expected in late
January while plans for other minerals are likely to be
announced later by their respective associations.
The China State Council Information Office held a press
conference in early January announcing new measure for
foreign investment in 2017.
Although detailed plans were not disclosed, three main areas
will be targeted: measures to expand foreign investment;
measures to promote fair competition between domestic and
foreign investment; and efforts to draw new foreign
According to the newly revised guidelines, entry
requirements for foreign investors will be expanded drastically
for the mining, manufacturing and service industries. China
also plans to additionally encourage high-end investment in
intelligent and green manufacturing, modification and upgrade
of traditional industries, and in the construction of
The State Council also outlined plans to treat domestic and
foreign company products equally as long as products are made
in China to the country’s standards. This follows
previous complaints by foreign companies that their products
were not treated equally and that foreign firms struggled to
win government purchasing bids.
Under existing Chinese regulations, foreign investment is
not permitted in the mining and exploration of fluorspar, and
into the mining, processing and separation of rare earths.
However, the updated guidelines may loosen limitations on these
Despite the encouraging policies, foreign companies are
hesitant to invest in Chinese industrial minerals such as
graphite, fluorspar and magnesite.
"Even though we can buy a graphite mining right, the
government still might take it back without any reason," one
graphite company – which has a Chinese office but
owns graphite mines outside of China – told IM,
particularly in light of graphite recently being added onto
China’s list of strategically important
*Conversions made February 2017